What is a Gold IRA Rollover?

A gold IRA is an Individual Retirement Account that permits investors to hold gold or other precious metals as assets in their investment portfolio. It functions similarly to a Traditional or Roth IRA, but instead of cash, stocks, and bonds, it holds gold coins or bars.

The Gold IRA’s birth began after the Taxpayer Relief Act (1997), which gave investors the freedom to add precious metals to their retirement accounts. Only gold, silver, platinum, and palladium are eligible for an IRA. Each asset must meet specific purity standards before being added to a retirement account.

In this post, we will cover everything you need to know about Gold IRAs and rollovers. By the end, you should have a clear understanding of this reasonably new investment strategy, and whether it’s a viable option for your portfolio.

A Brief History Lesson About the Gold IRA

As mentioned above, the Taxpayer Relief Act of 1997 spawned the Gold IRA’s birth by permitting investors to add precious metals as assets in their retirement accounts. But it wasn’t until the financial crisis of 2008 that Gold IRAs became the popular investment choice they are today.

When the market lost 50% of its value in early 2009, investors had a rude awakening. However, because gold prices were still rising, investors considered Gold IRAs a viable way to safeguard against inflation. Gold and other precious metals are a great way to diversify your portfolio, especially during an economic crisis.

What Is an IRA Rollover?

In simple terms, a Rollover IRA account allows you to move money from your previous employer’s 401(k) or 403(b) account to an IRA. You can also transfer funds from one IRA account to another if you believe they offer a better investment.

IRA rollovers have tight rules and regulations you must follow, and a Gold IRA is no exception. Gold IRA rollovers can happen under one of three circumstances:

  1. Your sponsoring company has a sudden change in its retirement plan
  2. The custodian of the retirement plan changes
  3. Your employer discontinues employment with your sponsoring company

What’s the Difference Between Rollovers and Transfers?

Bankers throw the word rollover around a lot, especially when talking about moving funds between retirement accounts. However, there’s a big difference between a rollover and a transfer.

A transfer typically refers to the movement of funds between two of the same kinds of IRA accounts, e.g., moving funds from a Roth IRA to another Roth IRA. If you’re transferring funds between two different types of retirement accounts, that’s a rollover.

Furthermore, there are distinct types of rollovers, such as:

Direct Rollovers – Moving of funds from a qualified retirement plan, 401(k), or 403 (b) into a traditional IRA. This method guarantees that the funds from your rollover are not taxable.

Indirect Rollovers – Moving funds from your account into an IRA within 60 days. Taxes are not withheld for this method.

Many investors choose to move a portion of their rollover into a Gold IRA rather than their savings account. With this in mind, the funds transferred to the Gold IRA will be subject to specific rules and regulations.

What Are the Advantages of a Gold IRA?

vault representing gold ira security
There’s no doubt that diversifying your portfolio with gold is wise, especially in the form of a Gold IRA. Tons of investors have had long-term success with these accounts, and it’s worth your time to look into their stories.

One of the most significant benefits of having a Gold IRA is its security. As mentioned above, gold is a great asset to hedge against inflation during an economic crisis, as its value is more stable than stocks, bonds, and real estate.

Another considerable advantage of a Gold IRA is control. In the likely event of a stock market crash, your gold will remain dominant, giving you more power in a weakened economy. Your assets won’t drop in value, and in some cases, their value may increase. Having a surplus of cash during an economic crisis opens up the doors to significant investment opportunities.

Whenever you’re making an investment decision, it’s essential to understand your financial commitment. Otherwise, you could face dire consequences and lose a significant part of your wealth. Avid investors always weigh the pros and cons before making a decision, and the same goes for gold. It just so happens that the positives of gold investing far outweigh the negatives.

Here are the main advantages of a Gold IRA Rollover:

Penalty-Free Transfers

There’s nothing worse than losing a chunk of your money during a transfer. Fortunately, when you rollover your 401(k), 403(b), or Traditional IRA into a Gold IRA, you won’t incur any transfer penalties. Your new custodian handles the entire process, which means you can move between accounts without any additional charges.

Protection Against Inflation

Since the value of precious metals tends to rise quickly, having them in your portfolio will help balance your wealth against inflation. For the last few decades, gold has outperformed stocks, mutual funds, and index funds.

By moving funds into a Gold IRA, you can expect to see your assets gradually increase every year. What better way to ensure a sustainable retirement?

Protected Investments

Some of the world’s most renowned investors vouch for precious metals to protect their assets from economic pitfalls. But why is gold seldom affected by a recession?

Gold has intrinsic value, meaning it’s a resource with real-life applications, e.g., electronic manufacturers use gold when building mobile phones or computer chips. The inherent value of gold is what makes it such a substantial investment, even during economic calamities. That’s why it’s a sound investment to protect your portfolio.

Do Gold IRAs Produce Higher Returns?

In the long-run, yes, Gold IRAs will produce higher returns than other investment strategies. Other investments like stocks or real estate can achieve higher yields, but only short-term. Also, you run the risk of losing all of your funds during troubling times.

Gold, however, is consistent and safe. With a Gold IRA, you’ll get to sit back and watch your portfolio grow for years to come. It doesn’t matter how old you are; if you want to secure a better future for you and your family, go for gold.

Can You Store Your Gold IRA at Home?

The Internal Revenue System has not approved the home-storage of a Gold IRA. IRAs are a partnership between you (the account holder) and the IRS. Therefore, all of the gold and other precious metals you store at home are not eligible for an IRA.

Be wary of investment companies that offer home-based storage, s it’s probably false advertising. If you’ve already signed on to a home-storage IRA, disband it and move your assets back into a traditional account immediately to avoid consequences or financial loss.

You can, however, store gold at home as a collectible. If you choose to do so, we recommend you get a protective case to preserve the condition of your coins or bars.

What About Platinum?

Platinum has been more valuable than gold throughout history. In our culture, platinum is at the top of the precious metal hierarchy. Step into any jewelry store, and you’ll notice platinum products are way more expensive than gold. In music, a platinum record is the highest achievement you can get as an artist for record sales. But what about platinum as an investment?

Although platinum is more valuable than gold, the demand for it isn’t as stable. Therefore, it may be difficult to liquidate your platinum assets. As of now, the automobile industry is the biggest market for platinum. During an economic crisis, the need for trucks and other heavy machinery decreases, so your platinum assets may not withhold their value.

If you’re an experienced investor, you may be able to spot opportunities where investing in platinum is a good idea. For those who are new to precious metals, we recommend you stick with gold.

How Much Gold Should You Have?

man thinking how many gold he should have
The smart thing to do is structure your portfolio to align with your long-term financial goals. There’s no doubt that gold will have a place in your collection, but you should never do uncalculated investing. To play it safe, many investors claim gold makes up for 5% to 10% of their portfolio. Depending on your current financial situation and risk sensitivity, you may invest more.

How Much Gold Can You Own?

As of now, there’s no restriction on how much gold an individual can own. The only things that limit the amount of gold you have are your wealth and self-confidence. However, you are subject to state your gold ownership on your tax form.

Final Thoughts

Moving some of your funds from your traditional retirement account to a Gold IRA is a safe bet for anyone looking for financial stability. But before you begin your Gold IRA rollover, be sure to research all of your options.

What are your thoughts on investing in gold? Do you think it’s a wise decision in this economy? We’d love to hear your opinion. If you’re looking for more advice, be sure to check out some of our other articles on gold investing.

Stay golden.

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